If you haven’t filed your tax return before the deadline, don’t worry—there’s still time. But don’t wait too long, since missing the tax deadline comes with financial consequences that can grow if not quickly attended to. This time of the year can be stressful, so take a deep breath and know that you have options.
Here’s a breakdown of exactly what you can expect if you miss the tax deadline, along with some tips to avoid this in the future.
You’ll Be Assessed Fees
When you miss the tax-filing deadline, you’ll be required to pay several penalties and interest on the amount assessed to your account. These penalties include:
- Failure to File Penalty: The Failure to File penalty (FTF) is 5% of the balance owed for each month you don’t pay your taxes, up to 25% maximum. However, if you can prove to the IRS there was a valid reason for paying late, it may waive this fee.
- Failure to Pay Penalty: Just because you don’t file your taxes doesn’t mean you can extend the time to pay your tax balance. The Failure to Pay penalty (FTP) is 0.5% of your unpaid taxes for each month they’re outstanding.
- Underpayment Fee: This penalty varies depending on your situation and filing status. You want to pay any balance owed as quickly as possible to avoid an underpayment fee penalty.
You may be assessed one or all of these penalties, along with any accumulated interest fees, for missing the tax deadline.
File Your Taxes ASAP
Missing the tax deadline doesn’t mean all is lost, but you should file your taxes as soon as possible. If you’re due a refund, you won’t be assessed any interest. But if you owe a tax balance and don’t pay what you owe, you will also owe both penalties and interest fees.
In both cases, however, you may be required to pay a Failure to File penalty, along with other penalties, so it’s best to file your taxes as soon as possible to avoid additional fees and charges.
Know Your Options
In the event you’re waiting on tax documents or need to correct some numbers, you can submit the tax return as-is now, then file an amended return once you receive the documents in question.
This will save you from paying extra penalties or being assessed fees. You can file your taxes online via e-file, possibly for no cost. The IRS offers e-filing through October 15 of the current tax year. It works with approved tax-filing software, including TurboTax, which will import your tax information directly.
Request an Extension
Whether you file a tax extension or not, you’re still required to pay any tax balance that’s due by the filing date. The extension only applies to filing your taxes, not paying the balanced owed. Apply for a tax extension by downloading Form 4868 and filling in your information, or hire a tax professional or CPA to help with the application.
Choose to file your extension form online using the IRS e-file options, or print and mail directly to the IRS. If approved, this will give you until October 15 of this year to get your taxes filed.
Pay Your Tax Balance
Pay as much of your tax balance as you can to avoid additional penalties and fees. Even if you’re unable to file your completed tax return, do an estimate of your tax bill and pay as much as possible.
The IRS offers electronic payment options, so you can pay directly from your bank account or using a credit or debit card. You can also send a check via snail mail. If you send a check, the check itself should include your name, Social Security number, tax year and tax form.
Apply for a Payment Plan
If you’re unable to pay the entire tax balance that’s due, you can apply for a payment plan with the IRS. Using its Online Payment Agreement, simply work out a plan to pay any taxes and penalties through regular installments. Don’t wait to figure out a payment plan; the longer you put it off, the more penalties and interest will accumulate.
Avoid This Next Year
To avoid this mishap in the future, put a system in place so you can be sure to file your taxes on time. Get set up with bookkeeping software like QuickBooks, and start tracking your income and expenses. If you need to, hire a bookkeeper who can help prioritize your accounting, create financial reports and keep you organized in preparation for next year’s taxes.
See our infographic on how to prepare the three essential financial statements for your business to make sure your books are organized throughout the year and ready for tax time.
Stick to a regular schedule every quarter to review your reports, and remember to make regular check-ins with your CPA. Then, when tax season rolls around again, set aside time earlier in the year to review your finances, and book an appointment with your tax professional. Preparing for tomorrow’s taxes today will keep the pressure off all year-round.
Looking for guidance as a sole proprietor, or for your partnership, limited liability company (LLC), S corporation or C corporation? Then see our tax guides for small businesses to learn more.